Archive for February, 2010

On Plane Crashes and Start-ups

Posted: February 21, 2010 in Uncategorized

I hate reading about airplane accidents. I know that statistically planes are safer than cars, but I fly often these days and stare out the windows on take off and decide to trust laws of physics and ignore the vagaries of life involving hung over pilots, underappreciated maintenance workers, and metal fatigue…

When there is an accident, particularly a deadly and tragic accident like last week’s Tesla motors Cessna crash, I am unnerved. I’ve watched numerous documentaries and news reports about airline crashes – and the same story repeats itself. It goes like this:

“Accidents occur when a chain of unfortunate events all line up exactly right,” said Paul Weihs, an FAA Safety Team representative for the San Jose region, whose company, Aviation Training Curriculum, teaches pilot safety at local airports. “One thing rarely causes a crash. But when you line them up, something is going to happen.”

Crashes are totally improbable. There are systems, and backup systems, and the odds of a random set of bad things lining up in just the wrong way are astronomical. But apparently, it happens. Try as we might, you just can’t protect from every odd permutation of events that can lead to a crash. According to flight statistics, the odds of being killed in a plane crash are somewhere between 1 in a million and 1 in 10 million, depending on airplane and airline…

Now that I’m leading a start-up company, I’m beginning to imagine another completely improbable event: utter success. From another body of research, the likelihood of a start-up company becoming an “out-of-the-park” success is also about 1 in a million. Most start-ups fail. Survivorship bias makes us all think that if you’re just smart you can build a Google or a Facebook. But the restaurants of Palo Alto are littered with the bodies of dead start-ups. Talk to any entrepreneur and the story is vaguely familiar:

Successes occur when a chain of remarkable events all line up exactly right. One good idea or one great employee or even an incredible product doesn’t always lead to financial success. You can do a lot of work to line up the right elements to improve your odds. But in the end, there is an enormous part that is luck.

Malcolm Gladwell, in his book Outliers, describes in researched detail how unexpectedly random events and environments tend to make the difference between outrageous success and typical failure. It’s not just genius of Bill Gates or John Lennon. It’s a little genius, hard work, and a lot of other crazy stuff: Who you went to school with. The year you were born. An odd law on the books that suddenly made one set of opportunities viable.

Venture Capital firms will often bet on an untested management team with a killer idea, or an accomplished management team with a sketchy idea… but rarely both. The odds just get uncontrollably bad when you don’t have some basic things lined up.

I tend to think of entrepreneurial ventures as a roulette game: there are lots of spaces on the wheel, only one leads to success, and you have maybe one spin or, if you’re lucky, two, in any given game. All you get to do as an entrepreneur is cover over some of the spaces with tape to reduce the chances of a miss. Got a great idea? Cover over two spaces. A fantastic CEO? A couple more. A lucky break in the press? A few more. Bit by bit you do what you can to control the things you can control, lower the number of spaces on the wheel. And when the spin comes, while it’s still going to be luck, at least you’ve moved the odds more and more in your favor. That’s the best you can hope for.

Reed Hastings, founder and CEO of Netflix, (and considered one of the top CEOs in the country) occasionally will describe the lucky moments in the past that helped get Netflix where it is today. No matter how famously strategic and innovative as Hastings has been, it was luck that Blockbuster didn’t realize the opportunity in DVD-by-mail one year sooner, even after tiny Netflix tried unsuccessfully to convince Blockbuster to work with them. That inadvertent Netflix head start made it impossible for Blockbuster to catch up. This, like numerous other little elements that no one could imagine or control, just fell into place; and when combined with vision, competent strategic thinking and a good team, lead to the multi-billion dollar business Netflix has become.

So whether it leads to a good outcome or a tragic one, those extremes are results of the same kinds of improbable lining up of events. Perhaps an entrepreneur should be no more confident of success than he is terrified of flying. (Ironically, however, fear of flying is somewhat pointless. But confidence in the successful outcome in your entrepreneurial venture, well, that is actually one of the attributes necessary in the lining up of random items that builds to success. It IS causal, or at least a positive contribution.) In the end, I try to be realistic and measured – both in my fears as I board the plane, and my expectations of changing the world with a company. But hey, come on… hope springs eternal. Buckle up, and cross your fingers.